The longstanding geopolitical and territorial differences between China and India continue to endure. Tensions stemming from Chinese and Indian border disputes, trade imbalances, and regional influence further complicate the relationship between the two Asian giants.
The Galwan incident of 2020, where 20 Indian soldiers were killed and China crossed the Line of Actual Control (LAC) illegally moving into Indian territory, is one of the geopolitical and border issues that the two nuclear-armed nations are facing.
Owing to these factors, the Indian government distanced the country from China, by banning its companies or cutting down investments from China-based companies.
In early 2024, the Enforcement Directorate (ED) conducted raids in approximately 19 locations across the country as part of a money laundering investigation involving two Chinese fintech companies.
A similar incident occurred in December 2023, when senior executives of Vivo, the popular Chinese cell phone company, were arrested for violating India’s Prevention of Money Laundering Act. In 2020, 59 major Chinese apps, including TikTok and Shein, were also banned.
However, a silver lining for Chinese companies seems to be emerging now. Here’s all you need to know about the current scenario.
How Did The GOI Block Chinese Companies From Coming To India?
In April 2020, the government of India (GOI) released a ‘Press Note 3’ which made various companies anxious and stressed. Press notes carry a lot of significance as the GOI introduces various policies and amendments through them.
For example, the 2016 Press Note release changed the way Indian consumers bought and sold products by putting FDI (Foreign Direct Investments) in single and multi-brand retail of the country, under severe restrictions.
Similarly, a 2018 Press Note forced various e-commerce companies to restructure their corporate governance as the GOI created stricter guidelines on the FDI involved in these markets.
The Press Note of 2020 pushed out Chinese companies from India. The policy said that all investments from countries that share borders with India will need to get approval from the Indian government.
These constraints caused the downfall of Joint Ventures (JVs). The collapse of a $1 billion investment proposal ‘Great Wall Motors’ from China to obtain a General Motors plant in Pune. The government received approximately 450 applications from Chinese firms in these four years and rejected about 180 of them, while only 70 of them have been approved and 200 are still pending.
However, this restriction is now gradually being relaxed.
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Is The GOI Re-Allowing Entry By Chinese Firms?
Many reports came up in 2022, hinting that the Indian government was rethinking about letting Chinese companies set up bases in India, under a few terms and conditions. However, nothing substantial happened back then.
The Economic Times reported that the Chief Executive Officers (CEOs) of four industries have revealed that the GOI is deliberating on softening its blow on Chinese firms, by planning to restart the pending manufacturing projects.
The main reason behind relaxing these constraints is that technologies possessed by certain Chinese firms will help boost the manufacturing process in India.
These projects, including ones in the vehicles and electronic components sector, are reviving with the help of the government’s accommodating approach. This not only gives way for the onset of new Chinese projects in the country, but also the existing ones to expand their capacity.
Although this is a thumbs-up for Chinese companies to return to India, they will still have to satisfy the eligibility criteria on Press Note 3 and will have to undergo thorough scrutiny, to safeguard Indian interests.
The government is asking Indian companies to apply for JVs under the new guidelines, which show a case-by-case relaxation of restrictions on Chinese investments.
Thus, Chinese firms are returning, but as Indian firms, the government directions imply that the Indian partner of the firm absolutely must hold the majority of the stake.
Image Credits: Google Images
Sources: The Economic Times, Business Standard, The Ken
This post is tagged under: Chinese, Indian, companies, firms, India, China, JV, Press Note, raid, Vivo, Indian, Galwan attack, soldiers, stake, investment, government, guidelines, CEO, manufacturing, General Motors, Great Wall Motors, The Economic Times, LAC, ED, TikTok, Shein, FDI, Prevention of Money Laundering Act
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